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What is gratuity?

Gratuity is a part of the salary, which the employee receives from his employer in return for the job/services offered by the employee to the organization. Gratuity is defined as a benefit plan and is one of the major after-job perks the employee receives from the employer after leaving the job.

TOI-Online | Mar 15, 2018, 12:14 IST

Gratuity is a part of the salary, which the employee receives from his employer in return for the job/services offered by the employee to the organization. Gratuity is defined as a benefit plan and is one of the major after-job perks the employee receives from the employer after leaving the job.

Eligibility for Gratuity

According to the Sec 10 (10) of the Income Tax Act, an employee gets gratuity after he/she completes a minimum of 5 years of full-time service with the employer, which means a minimum of 240 days a year.

In most cases, an employer offers gratuity out of his own funds or may approach an insurer to get a group gratuity plan. If the employer goes for a life insurer, he has to pay annual contributions as decided by the insurer. The employee is also free to make contributions to his gratuity fund. The gratuity will be paid by the insurer based upon the terms of the group gratuity scheme.

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